25 Feb

Landlords look at new loans

Landlords look at new loans

The recent changes to landlord tax rules means many investors are opting to take out commercial loans.

Research from the National Landlords Association (NLA) showed there has been a rise in the number of landlords who prefer to use commercial loans to purchase new investment properties.

In July 2015, ten per cent of landlords made use of such funding to expand their portfolio, but by the end of 2016 this increased to 19 per cent.

The NLA believe changes to taxation set to be introduced in April and fully phased in by 2021, means landlords are looking for alternative financial arrangements. The new legislation will stop landlords from being able to deduct their interest payments on buy-to-let mortgages before declaring taxable income.

Richard Lambert, chief executive officer at the NLA said: “Over the last year more than one hundred thousand landlords have formed a limited company in order to beat the tax changes, and this overlaps with an increasing intention to look to commercial loans to fund future purchases.

“While commercial loans are available to non-incorporated landlords they tend to be a source of funding more commonly used by limited companies looking to expand their property portfolios, so we’d expect to see this trend develop as the year plays out.

“However, we know that the Treasury is concerned by the drop in tax revenues as a result of businesses across the economy incorporating to reduce their tax bills, and the Chancellor hinted at a review into the matter during his Autumn Statement last year.

“With this government’s recent track record in mind, we’d advise any landlords who have yet to incorporate to wait to see whether a consultation is launched in the Budget before making a decision.”ADNFCR-1222-ID-801832950-ADNFCR

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